Redefining the State of Play for Crypto Payments
Ask the average person about cryptocurrency and their mind will immediately jump to Bitcoin, with its much-publicised price-fluctuations. It’s a fascinating story of a currency which cost as little as a dollar in 2011 and reached a high of nearly $20,000 in 2017 before dramatically dropping to around $3,600 just one year later. That’s certainly attention-grabbing for even the most casual investor or internet user. The heated conversation around Bitcoin is equally absorbing, as experts passionately argue over whether the bubble is sure to burst or soar to the moon.
Anyone with a serious interest in crypto knows that Bitcoin is just the beginning. There are several other major players on the cryptocurrency landscape, some of whom might even have more staying power. Not to mention, blockchain technology itself is becoming more widely adopted as its many potential applications are uncovered. So what’s next in the ever-expanding world of crypto?
Developing a Regulatory Framework
In order for cryptocurrency to become safer and more stable, it obviously needs to be regulated. Developing that regulatory framework is a challenge, though – any effective regulation of a decentralised currency has to be on the basis of international agreement and cooperation. The topic was discussed at the G20 summit earlier this year, with the final consensus being that more data is needed before regulatory guidelines can be decided upon. In the meantime, a number of individual countries have already made their personal positions clear.
Countries such as Australia and Canada have taken the lead in establishing their own forms of cryptocurrency regulation. Others including South Korea and Hong Kong are said to be right on the verge of announcing their positions. Meanwhile, a new report by the Financial Stability Board is likely to have an impact on future policy-making. The report unequivocally states that “crypto-assets do not pose a material risk to global financial stability at this time”.
At the same time, there is hope for a self-regulatory organisation on the horizon. A number of cryptocurrency exchanges have come together to create the Virtual Commodity Association Working Group, which seeks to develop a regulatory framework that promotes security, transparency and best practices.
The Best Places to do Business
Several small territories are already far ahead of the curve as they actively work to attract new crypto business. Malta is one of the best-known – its Virtual Financial Assets Act, which regulates ICOs, came into effect in November 2018. The same goes for its Innovative Technology Services Act, which certifies approved crypto providers. The first ever Malta Blockchain Summit takes place at the very same time. It’s no surprise that Malta is home to a number of major cryptocurrency exchanges, including Binance and BitBay.
Lithuania, meanwhile, has distinguished itself for its openness to crypto innovation. It has already issued a comprehensive set of guidelines for ICOs, enabling it to attract more start-up funding via ICOs than almost any other nation. The Bank of Lithuania has also recently launched a regulatory sandbox which allows Fintech companies to test out new products in a live environment with real consumers, while receiving direct regulatory guidance and supervision. At the recent Fintech Inn conference in Vilnius, the Bank of Lithuania and the Ministry of Finance reiterated their welcoming, forward-thinking stance on crypto, emphasising their willingness to work on regulation and get it right for the good of the industry and the country.
Gibraltar is another key player, having launched the Distributed Ledger Technology Regulatory Framework, which enables crypto companies to become authorised DLT Providers. It is also home to the Gibraltar Blockchain Exchange, a subsidiary of the Gibraltar Stock Exchange. Not one to be left behind, Bermuda introduced the Initial Coin Offering Act in May 2018 and the Digital Asset Business Act a month later. It’s a move that has led to a partnership with Binance, to the order of $15 million.
Crypto Payments vs. Credit Cards
Many cryptocurrency experts believe that crypto payments could overtake credit card payments, as crypto offers several unique advantages. Unlike credit card payments, crypto payments are anonymous peer-to-peer transactions which avoid the interference of a third party. They are also irreversible, which means that merchants can avoid the risk of customer charge-backs. They can also enjoy significantly lower, or even non-existent, transaction fees.
Nevertheless, killing the credit card completely seems like a tall order. What seems more likely is that crypto payments will come to complement credit cards. Earlier this year, MasterCard had its patent for a cryptocurrency credit card approved in the US. Their plan is to connect cryptocurrency assets with fiat currency accounts, so customers can use a familiar credit card to pay with cryptocurrency. In fact, crypto credit cards are already on the horizon, including offerings from Nexo, TenX and Monaco.
Overcoming Fear and Volatility
As with any new technology, it’s going to take a while for cryptocurrency to stop being a niche pursuit and fully enter the mainstream. As an individual investor, you need a decent dose of technical knowledge and high-powered hardware to start mining cryptocurrency successfully. Merchants, meanwhile, remain hesitant about cryptocurrency adoption since most don’t understand how it works yet.
Cryptocurrency itself is inherently volatile, as those massive Bitcoin price-swings have shown – it has no intrinsic value or fundamental price to fall back on, so it’s impossible to know if you’re paying a good price for it. As a result, cryptocurrencies still lack an infusion of institutional capital which could hugely legitimise them. Institutional investors, unlike individual investors, are much more likely to hold on to their investment over the long term, thereby giving cryptocurrency the legs it needs. In the current climate, cryptocurrency remains an easy target for price manipulation and fraud. Meanwhile, banks, wary of the risk, are mostly unwilling or unable to offer their services to blockchain companies.
Paving the Way
The good news for crypto startups is that there are payment gateway solutions out there which can ease the process of cryptocurrency adoption significantly. Here at Paydoo we already enable secure cross-border payments for a variety of blockchain companies. The depth of experience we’ve gathered over the years allows us to provide expert insight and intuitive solutions for detecting and blocking fraud in real-time.
Despite a few hurdles, the rate of cryptocurrency adoption is only set to increase. More and more millennials are excited about cryptocurrency’s potential and are making the effort to educate themselves. In fact, 42% of the top 50 universities in the world now offer courses on blockchain and/or crypto. Proper regulation is becoming a reality, which means that rampant fraud is slowly but surely on the way out. In the meantime, Paydoo is proud to be at the forefront of the movement, enabling the crypto industry to achieve its fullest potential.